For executives and in-house counsel, capital‑markets access can determine whether strategic plans accelerate or stall. Reverse mergers remain a viable path to the public markets, but only for companies that understand how Nasdaq and the U.S. Securities and Exchange Commission (SEC) now evaluate them.

At the center of the shift is the so‑called Nasdaq Seasoning Myth, the mistaken belief that a private company can merge with a dormant public shell and list immediately. That shortcut is gone. Nasdaq now requires evidence of real operations, credible governance, and complete disclosure, and in many cases a period of post‑merger trading and reporting before listing approval.

The modern reverse merger

Reverse mergers today are not about speed. They are about readiness. The process demands transparency, operational depth, and governance that matches the standards applied to initial public offering (IPO) candidates.

A “shell” company is a public company with no, or nominal operations and only cash, cash equivalents, and nominal other assets. When a private company merges into a shell and assumes control, the transaction is typically treated as a reverse recapitalization. Under Nasdaq Rule 5110(c), a company formed through such a reverse merger generally must: (1) trade for at least one year on the over-the-counter (OTC) markets, another national exchange, or a regulated foreign exchange; (2) file at least one full year of  timely filed post‑merger SEC periodic reports; and (3) satisfy the applicable share‑price requirement for at least 30 of the prior 60 trading days. The exception is a firm‑commitment underwritten offering that raises at least $40 million in gross proceeds in connection with listing.

Quality and readiness over speed

Even where no shell is involved, a combination that results in a change of control and enables a non‑Nasdaq business to obtain a Nasdaq listing can trigger a fresh initial‑listing review under Rule 5110(a). In that situation, the combined company must meet the full quantitative and qualitative listing standards, including price, float, equity, and shareholder distribution. Nasdaq’s deeper review, however, increasingly turns on qualitative factors, including governance, internal controls, operational continuity, and the credibility of the issuer’s public reporting.

With U.S. markets now operating under T+1 settlement, equity trades generally settle one business day after the trade date. This compressed timetable leaves little room to cure deficiencies after pricing. In practice, key regulatory and settlement workstreams, including Nasdaq review, FINRA Rule 5110 clearance, Regulation M sequencing, and DTC eligibility, must be substantially complete before launch and pricing, because there is minimal time to resolve issues between trade date and settlement.

Disclosure as a test of credibility

A Form S‑4 or proxy statement that relies on outdated terms or valuation assumptions signals misalignment with current conditions. When market or operating circumstances shift, amendments should be made promptly. Accurate, current disclosure builds credibility with both Nasdaq and investors. Under SEC Rule 145(a), a business combination between a reporting shell company and an operating company is deemed a Securities Act sale, making a registration statement on FormS‑4 or Form F‑4, as applicable, the default path, with corresponding IPO‑level liability.

What Nasdaq looks for

Privately held executives should center preparation around five elements:

• Operating substance: Demonstrable business activity and revenue.
• Float quality: Broad, unrestricted ownership that supports orderly trading.
• Financing: A capital structure that supports at least twelve months of operations on a going‑concern basis.
• Governance and controls: Functional audit oversight, internal‑control maturity, and consistent reporting.
• Timing and coordination: Aligned review with FINRA, Regulation M, DTC, and Nasdaq, with workstreams completed early in the cycle.

Turning seasoning into strategy

When Nasdaq imposes a seasoning period, it should be viewed as preparation rather than penalty. Twelve months of consistent and timely reporting, control testing, and investor‑relations work often leads to a stronger application and better post‑listing performance.

The path forward

The era of “instant listings” is over. Today, the market rewards readiness, governance, and transparency. For leadership teams evaluating a reverse merger or IPO, the central question is not how quickly the company can go public, but how prepared it is to operate as a public company. With disciplined planning, whether through an underwritten raise enabling immediate listing or a deliberate seasoning process, companies can still reach the exchanges on strong and sustainable footing.